IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/7190.html
   My bibliography  Save this paper

Education for Growth in Sweden and the World

Author

Listed:
  • Alan B. Krueger
  • Mikael Lindahl

Abstract

This paper tries to reconcile evidence on the effect of schooling on income and on GDP growth from the microeconometric and empirical macro growth literatures. Much microeconometric evidence suggests that education is an important causal determinant of income for individuals within countries as diverse as Sweden and the United States. At a national level, however, recent studies have found that increases in educational attainment are unrelated to economic growth. This finding is shown to be a spurious result of the extremely high rate of measurement error in first-differenced cross-country education data. After accounting for measurement error, the effect of changes in educational attainment on income growth in cross-country data is at least as great as microeconometric estimates of the rate of return to years of schooling. We also investigate another finding of the macro growth literature -- that economic growth depends positively on the initial stock of human capital. We find that the effect of the initial level of education on growth is sensitive to the econometric assumptions that are imposed on the data (e.g., constant-coefficient assumption), as well as to the other covariates included in the model. Perhaps most importantly, we find that the initial level of education does not appear to have a significant effect on economic growth among OECD countries. The conclusion comments on policy implications for Sweden based on the human capital literature.

Suggested Citation

  • Alan B. Krueger & Mikael Lindahl, 1999. "Education for Growth in Sweden and the World," NBER Working Papers 7190, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:7190
    Note: LS CH
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w7190.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Steven G. Rivkin & Eric A. Hanushek & John F. Kain, 2005. "Teachers, Schools, and Academic Achievement," Econometrica, Econometric Society, vol. 73(2), pages 417-458, March.
    2. Griliches, Zvi & Mason, William M, 1972. "Education, Income, and Ability," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages 74-103, Part II, .
    3. repec:fth:prinin:357 is not listed on IDEAS
    4. Mikael Lindahl & Alan B. Krueger, 2001. "Education for Growth: Why and for Whom?," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1101-1136, December.
    5. Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543.
    6. Angrist, Joshua D. & Krueger, Alan B., 1999. "Empirical strategies in labor economics," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 23, pages 1277-1366, Elsevier.
    7. Donald, Stephen G & Newey, Whitney K, 2001. "Choosing the Number of Instruments," Econometrica, Econometric Society, vol. 69(5), pages 1161-1191, September.
    8. Murphy, Kevin M & Welch, Finis, 1990. "Empirical Age-Earnings Profiles," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 202-229, April.
    9. Alan B. Krueger & Jorn-Steffen Pischke, 1995. "A Comparative Analysis of East and West German Labor Markets: Before and After Unification," NBER Chapters, in: Differences and Changes in Wage Structures, pages 405-446, National Bureau of Economic Research, Inc.
    10. Paul Taubman, 1976. "Earnings, Education, Genetics, and Environment," Journal of Human Resources, University of Wisconsin Press, vol. 11(4), pages 447-461.
    11. W. Steven Barnett, 1992. "Benefits of Compensatory Preschool Education," Journal of Human Resources, University of Wisconsin Press, vol. 27(2), pages 279-312.
    12. Fredriksson, Peter, 1997. " Economic Incentives and the Demand for Higher Education," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(1), pages 129-142, March.
    13. Costas Meghir & Mårten Palme, 1999. "Assessing the effect of schooling on earnings using a social experiment," IFS Working Papers W99/10, Institute for Fiscal Studies.
    14. Uusitalo, R. & Conneely, K., 1998. "Estimating Heterogeneous Treatment Effects in the Becker Schooling Model," University of Helsinki, Department of Economics 435, Department of Economics.
    15. Barro, Robert J. & Lee, Jong-Wha, 1993. "International comparisons of educational attainment," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 363-394, December.
    16. Topel, Robert, 1999. "Labor markets and economic growth," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 44, pages 2943-2984, Elsevier.
    17. Card, David & Krueger, Alan B, 1992. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 1-40, February.
    18. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
    19. Andrea Ichino & Rudolf Winter-Ebmer, 2004. "The Long-Run Educational Cost of World War II," Journal of Labor Economics, University of Chicago Press, vol. 22(1), pages 57-86, January.
    20. Harmon, Colm & Walker, Ian, 1995. "Estimates of the Economic Return to Schooling for the United Kingdom," American Economic Review, American Economic Association, vol. 85(5), pages 1278-1286, December.
    21. Maluccio, John A., 1998. "Endogeneity of schooling in the wage function," FCND discussion papers 54, International Food Policy Research Institute (IFPRI).
    22. Per-Anders Edin & Bertil Holmlund, 1995. "The Swedish Wage Structure: The Rise and Fall of Solidarity Wage Policy?," NBER Chapters, in: Differences and Changes in Wage Structures, pages 307-344, National Bureau of Economic Research, Inc.
    23. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
    24. Chamberlain, Gary & Imbens, Guido, 1996. "Hierarchical Bayes Models with Many Instrumental Variables," Scholarly Articles 3221489, Harvard University Department of Economics.
    25. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    26. Angrist, J D & Imbens, G W & Krueger, A B, 1999. "Jackknife Instrumental Variables Estimation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(1), pages 57-67, Jan.-Feb..
    27. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1997. "The return from community college schooling for displaced workers," Working Paper Series, Macroeconomic Issues WP-97-16, Federal Reserve Bank of Chicago.
    28. repec:eee:labchp:v:1:y:1986:i:c:p:525-602 is not listed on IDEAS
    29. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
    30. Peter Fredriksson, 1997. "Economic Incentives and the Demand for Higher Education," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(1), pages 129-142, March.
    31. David Card & Alan Krueger, 1996. "Labor Market Effects of School Quality: Theory and Evidence," Working Papers 736, Princeton University, Department of Economics, Industrial Relations Section..
    32. Isacsson, Gunnar, 1999. "Estimates of the return to schooling in Sweden from a large sample of twins," Labour Economics, Elsevier, vol. 6(4), pages 471-489, November.
    33. Jin Huem Park, 1994. "Returns to Schooling: A Peculiar Deviation from Linearity," Working Papers 714, Princeton University, Department of Economics, Industrial Relations Section..
    34. Jin Huem Park, 1994. "Returns to Schooling: A Peculiar Deviation from Linearity," Working Papers 714, Princeton University, Department of Economics, Industrial Relations Section..
    35. Psacharopoulos, George, 1994. "Returns to investment in education: A global update," World Development, Elsevier, vol. 22(9), pages 1325-1343, September.
    36. David Card & Alan B. Krueger, 1996. "Labor Market Effects of School Quality: Theory and Evidence," NBER Working Papers 5450, National Bureau of Economic Research, Inc.
    37. Anders Forslund & Alan B. Krueger, 1997. "An Evaluation of the Swedish Active Labor Market Policy: New and Received Wisdom," NBER Chapters, in: The Welfare State in Transition: Reforming the Swedish Model, pages 267-298, National Bureau of Economic Research, Inc.
    38. Kane, Thomas J & Rouse, Cecilia Elena, 1995. "Labor-Market Returns to Two- and Four-Year College," American Economic Review, American Economic Association, vol. 85(3), pages 600-614, June.
    39. Claudia Goldin & Lawrence F. Katz, 1998. "The Origins of Technology-Skill Complementarity," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 693-732.
    40. Angrist, Joshua D & Newey, Whitney K, 1991. "Over-Identification Tests in Earnings Functions with Fixed Effects," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(3), pages 317-323, July.
    41. Lang, Kevin, 1993. "Ability Bias, Discount Rate Bias and the Return to Education," MPRA Paper 24651, University Library of Munich, Germany.
    42. Pritchett, Lant, 1996. "Where has all the education gone?," Policy Research Working Paper Series 1581, The World Bank.
    43. Kristin F. Butcher & Anne Case, 1994. "The Effect of Sibling Sex Composition on Women's Education and Earnings," The Quarterly Journal of Economics, Oxford University Press, vol. 109(3), pages 531-563.
    44. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. "Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-389, September.
    45. Joshua D. Angrist & Alan B. Keueger, 1991. "Does Compulsory School Attendance Affect Schooling and Earnings?," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 979-1014.
    46. Magnus Blomström & Robert E. Lipsey & Mario Zejan, 1996. "Is Fixed Investment the Key to Economic Growth?," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 269-276.
    47. Freeman, Richard B. & Topel, Robert H. & Swedenborg, Birgitta (ed.), 1997. "The Welfare State in Transition," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226261782, December.
    48. Griliches, Zvi, 1986. "Economic data issues," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 25, pages 1465-1514, Elsevier.
    49. Mark Bils & Peter J. Klenow, 1998. "Does Schooling Cause Growth or the Other Way Around?," NBER Working Papers 6393, National Bureau of Economic Research, Inc.
    50. Peter J. Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114, National Bureau of Economic Research, Inc.
    51. Ashenfelter, Orley & Krueger, Alan B, 1994. "Estimates of the Economic Returns to Schooling from a New Sample of Twins," American Economic Review, American Economic Association, vol. 84(5), pages 1157-1173, December.
    52. Jacob A. Mincer, 1974. "Schooling and Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 41-63, National Bureau of Economic Research, Inc.
    53. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
    54. Summers, Anita A & Wolfe, Barbara L, 1977. "Do Schools Make a Difference?," American Economic Review, American Economic Association, vol. 67(4), pages 639-652, September.
    55. Behrman, Jere R. & Rosenzweig, Mark R., 1994. "Caveat emptor: Cross-country data on education and the labor force," Journal of Development Economics, Elsevier, vol. 44(1), pages 147-171, June.
    56. Behrman, Jere R & Birdsall, Nancy, 1983. "The Quality of Schooling: Quantity Alone is Misleading," American Economic Review, American Economic Association, vol. 73(5), pages 928-946, December.
    57. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
    58. Freeman, Richard B. & Katz, Lawrence F. (ed.), 1995. "Differences and Changes in Wage Structures," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226261607, December.
    59. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mikael Lindahl & Alan B. Krueger, 2001. "Education for Growth: Why and for Whom?," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1101-1136, December.
    2. Angel de la Fuente & Antonio Ciccone, 2003. "Human capital in a global and knowledge-based economy," UFAE and IAE Working Papers 562.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    3. Colm Harmon & Hessel Oosterbeek & Ian Walker, 2000. "The returns to education : a review of evidence, issues and deficiencies in the literature," Open Access publications 10197/670, School of Economics, University College Dublin.
    4. Colm Harmon & Hessel Oosterbeek & Ian Walker, 2003. "The Returns to Education: Microeconomics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(2), pages 115-156, April.
    5. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-1160, September.
    6. repec:ucn:wpaper:10197/1099 is not listed on IDEAS
    7. Eric A. Hanushek & Ludger Woessmann, 2008. "The Role of Cognitive Skills in Economic Development," Journal of Economic Literature, American Economic Association, vol. 46(3), pages 607-668, September.
    8. Marcelo Soto, 2006. "The Causal Effect of Education on Aggregate Income," Working Papers 0605, International Economics Institute, University of Valencia.
    9. Maluccio, John A., 1998. "Endogeneity of schooling in the wage function," FCND discussion papers 54, International Food Policy Research Institute (IFPRI).
    10. Ashenfelter, Orley & Harmon, Colm & Oosterbeek, Hessel, 1999. "A review of estimates of the schooling/earnings relationship, with tests for publication bias," Labour Economics, Elsevier, vol. 6(4), pages 453-470, November.
    11. Behrman, Jere R., 1996. "Measuring the effectiveness of schooling policies in developing countries: Revisiting issues of methodology," Economics of Education Review, Elsevier, vol. 15(4), pages 345-364, October.
    12. Adrien Montalbo, 2019. "Education and economic development. The influence of primary schooling on municipalities in nineteenth-century France," Working Papers halshs-02286126, HAL.
    13. Wößmann, Ludger, 2000. "Specifying Human Capital: A Review, Some Extensions, and Development Effects," Kiel Working Papers 1007, Kiel Institute for the World Economy (IfW Kiel).
    14. Concetta, MENDOLICCHIO, 2006. "A Disaggregate Analysis of Private Returns to Education in Italy," Discussion Papers (ECON - Département des Sciences Economiques) 2006054, Université catholique de Louvain, Département des Sciences Economiques.
    15. Orley Ashenfelter & Colm Harmon & Hessel Oosterbeek, 1999. "A Review of Estimates of the Schooling/Earnings Relationship, with Tests for Publication Bias," Working Papers 804, Princeton University, Department of Economics, Industrial Relations Section..
    16. Park, Seonyoung, 2011. "Returning to school for higher returns," Economics of Education Review, Elsevier, vol. 30(6), pages 1215-1228.
    17. Adrien Montalbo, 2019. "Education and economic development. The influence of primary schooling on municipalities in nineteenth-century France," PSE Working Papers halshs-02286126, HAL.
    18. Daren, Conrad, 2007. "Education and Economic Growth: Is There a Link?," MPRA Paper 18176, University Library of Munich, Germany, revised 2009.
    19. David Card & Alan B. Krueger, 1996. "Labor Market Effects of School Quality: Theory and Evidence," NBER Working Papers 5450, National Bureau of Economic Research, Inc.
    20. Denis Maguain, 2007. "Les rendements de l'éducation en comparaison internationale," Économie et Prévision, Programme National Persée, vol. 180(4), pages 87-106.
    21. Sonia Bhalotra & Claudia Sanhueza, 2004. "Parametric and Semi-parametric Estimations of the Return to Schooling in South Africa," Econometric Society 2004 Latin American Meetings 294, Econometric Society.

    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:7190. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.